At 7.8%, A slight drop in inflation in August

According to National Bureau of Statistics, this last August the monthly inflation stood at 7.8%, representing a 1.2% drop since July. At that time, the rate had shot up to a staggering 9.0%. The drop is certainly a welcome development and should improve the current business environment.

According to Bank of Tanzania, by comparison, the inflation was at 5.5% in August of last year. Generally there has been an upswing in monthly inflation figures since January of 2006 due to rise in global oil prices, drought and the energy crisis that befelled the country at the time. However, many pundits have attributed this July’s rise in inflation as due to new budgetary measures, particularly the introduction of excise duty on fuel. The levy paid by road users was increased from 8 USD cents to 16 USD cents per litre of petrol and diesel. It has been reported that industrialist and transporters have since passed on this cost to consumers, fuelling the inflation. When Zakhia Meghji, Minister of Finance, announced the fuel levy in her last budget speech, she downplayed any inflationary effects it may cause, saying the economy was resilient and pleaded with unscrupulous industrialists not to artificially raise prices.

Annually, this year’s inflation is also projected to fall below last year’s 6.2% figure to 5.2% (according to Ministry of Finance and JP Morgan emerging market research, June 8, 2007). Next year, the annual inflation is expected to fall further to 4.5%, which is close to the annual levels experienced in 2005 (4.4%) and 2004 (4.1%).